Herbalife Ltd. (NYSE:HLF) released the economic analysis of Dr. Walter H. A. Vandaele, managing director of Navigant Economics regarding its business operations in the United States in response to the recent attacks of activist investor, Bill Ackman.
The management of Herbalife hired Dr. Vandaele to determine whether it is operating its business appropriately and classified as beneficial and legitimate multilevel marketing (MLM).
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According to the company, Dr. Vandaele is expert in economics, regulation and operations of firms within the consumer goods industry. He was a former Economic Advisor to the Director of the Bureau of Competition. He also served as Assistant Director to the Director of Consumer Protection of the U.S. Federal Trade Commission (FTC).
The stock price of Herbalife is trading around $58.50 per share, up by more than 8% at the time of this writing at 10:47 A.M. in New York.
Dr. Vandaele’s findings
Herbalife said Dr. Vandaele’s research and analysis found that its business operations in the United States are “consistent with the socially beneficial MLM model and inconsistent with the socially harmful pyramid scheme model.”
He also found the approximately 97% of the U.S. product volumes of Herbalife Ltd. (NYSE:HLF) were bought from end-use consumption and 80% were consumed by individuals outside its member network (39%) or consumer by members who joined the company primarily to receive product discounts for their own use.
Dr. Vandaele also found that the products of Herbalife have significant intrinsic value and market demand. He also indicated that the amount of investment required to join the company is not large and mostly recoverable. He discovered that members can return the starter pack, unsellable inventory and discretionary training materials through a 100% money-back guarantee.
He also found that the individuals who participated in Herbalife’s business opportunity have reasonable prospects to make profits from reselling its products, and they earn performance incentives.
Ackman says Herbalife will collapse
During an interview with CNBC yesterday, Ackman stated that the shares of Herbalife will collapse. According to him, the company is the “largest public fraud in terms of scale, of countries involved and harm to people.”
Ackman said he hundreds of hours of internal video and internal documents provided by some employees to support his accusations against Herbalife Ltd. (NYSE:HLF). He will deliver all the details in his presentation today.